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Retailers gloomy over first quarter prospects: Report

Tuesday, 3 January 2012 | By Michelle Hammond
Retailers remain pessimistic about their performance in the first quarter, according to a Dun & Bradstreet report, with expectations down 26 points compared with the same period in 2011.

 

According to the latest Dun & Bradstreet Business Expectations Survey, for the March 2012 quarter, 55% of retailers see slow demand as the biggest barrier in the year ahead.

 

The survey shows 34% of retailers are concerned about wages and salary growth, up from 25% in November, while 56% expect online sellers to have an adverse effect on traditional retailers.

 

Dun & Bradstreet chief executive Christine Christian says online traders continue to enjoy significant advantages over traditional retailers, for whom operating costs erode profit margins.

 

“The situation is likely to deteriorate for those retailers unwilling or unable to adapt to changing consumer behaviour,” Christian warns.

 

Sales and profits expectations for the first quarter of 2012 are down 15 and 22 points respectively on the same quarter in 2011.

 

Retailers have good reason to be cautious, with new research by eBay and Gumtree revealing a third of Australians plan to use online sites to sell unwanted Christmas presents.

 

Two thirds of Australians will use the extra funds to pay off bills or boost their savings, suggesting consumers are returning to their thrifty spending habits now that Christmas is over.

 

Retailers’ concerns about the year ahead come despite the sector recording relatively strong results for the September quarter, compared with the first half of 2011.

 

During this time, retail sales rose to equal the cross-sector average of 14, up from -3 in the June quarter. Likewise, retail profits rose to an index of two, up from -10 during the June quarter.

 

But Christian says ongoing uncertainty in the global economy is acting as a drag on the national outlook, particularly as the world braces itself for a second recession.

 

“It is inevitable that local businesses will begin to question how this may affect their business in the coming year,” she says.

 

“As insulated as we have been so far from the turmoil in overseas markets, a second global recession will undoubtedly have consequences for sectors of the economy.”

 

Duncan Ironmonger, Dun & Bradstreet’s economic consultant, says while retail is under pressure, as a whole the Australian economy is maintaining modest growth prospects.

 

“This is within a relatively benign inflationary environment. The D&B selling prices expectations index is only 14, some 17 points below the 10-year average index of 31,” he says.

 

“This low inflation situation for the Australian economy was confirmed by the Reserve Bank’s decision in early December to lower the cash rate to 4.25%.”

 

“The bank now sees the rate of inflation for the next couple of years to remain within its target range of 2-3%.”